This is the 2nd post in our quarterly result update series for Q4FY21.
In this post, we’re sharing the latest updates of the stocks from our watchlist. Please don’t treat this as a buy recommendation. We find these businesses interesting and we may build position (or buy more of those that are already in our portfolio) in them in the future. The purpose of this post is to bring clarity to our understanding of the businesses we are tracking. We make our notes on the quarterly results and conference calls. Putting it up here makes it easier for us to refer them at a future date.
You can see the earlier updates here.
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Please click on the read more button for more details on each stock.
Bajaj Finance
The current quarter was good for Bajaj Finance with PAT rising 42% YoY despite revenues and AUM growth flat YoY. The company’s focus on building an omnichannel framework and app ecosystem is the immediate concern as it will also help it harness its potential through digital transformation. The app suite should be up and launched by Sep. It remains to be seen how the current situation evolves with the 2nd wave of COVID-19 in India and whether the company’s preparations are adequate to weather the incoming uncertainty. Nonetheless, given the company’s strong market position, the management drive to derive new opportunities through the use of data and technology, and its strong balance sheet position, Bajaj Finance remains a pivotal NBFC stock for all Indian investors.
HDFC AMC
HDFC AMC had a good quarter due to healthy inflows on the fixed income side and the resumption of inflows into equity from March. The new CEO has highlighted that customer-centricity shall remain the prime focus going forward. The company is also looking to grasp the opportunity in the passive space by establishing its brand in the index funds space where it enjoys a market-leading 30% share. The management has admitted that returns in the past few years have been less than desirable for the equity segment but the added diversity in style and strategy from the new portfolio managers and the broad-based market rise of recent times should see alpha generation rising. It remains to be seen how the economic situation will unravel during and after the 2nd wave of COVID-19 and how it will continue to affect the investment sentiments in India. However, given the company’s strong past track record and its leadership position in the industry, the medium and long-term outlook for HDFC AMC remains intact.
Nippon Life India AM
NAM saw good performance in Q4 & FY21 with profits rising as high as 64% YoY in FY21 despite sales rising only 18% YoY. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company and has seen good participation in its recent NFOs. It has strengthened its hold in the passive space by launching 5 new passive funds in Q4. It continues to bring in old customers who are now looking to restart their relationship post the rebranding which is expected to the primary reason behind adding 9 lac unique customers in FY21. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and how the overall economy and market sentiments will be affected by the 2nd wave of COVID-19. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.
Syngene International
Syngene has seen a good Q4 with the contract extension with Bristol Myers Squibb until 2030. The company has also been enhancing its digital side to reduce turnaround time and improve efficiencies. The management remains confident that the IDD research capability and the end-to-end value chain construction ability will be what drives growth for Syngene for the next 5 years. It remains to be seen how long will it take for the company’s foray into CMO to bear fruit and whether there are any surprises in store for Syngene from the 2nd wave of COVID-19. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors.
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